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U.S. government bonds rallied Tuesday and pushed the ten-year yield to its lowest level in four months as investors squandered bets on tighter monetary policy and reacted to a disappointing poll on services sector.
The yield on the ten-year benchmark fell 0.07 percentage points to 1.36%, its lowest level since late February, when they fear a rapid recovery of inflation began to reverberate through the financial markets.
The ten-year yield, which moves inversely to its price, rose to 1.77% earlier this year as investors began to anticipate a more aggressive response. Federal Reserve to domesticate rising inflation.
Tuesday’s movements added fuel to a rally in former U.S. treasuries that began Friday, when government data was shown. U.S. recruitment had accelerated, but not at a rate sufficient to bring about a change in central bank policy. The Fed’s extremely weak monetary policies, including historically low interest rates and a massive bond-buying program, have been key elements in keeping debt costs low and raising the prices of other assets.
Data released on Tuesday by the Institute for Supply Management, which monitors activity in the services sector, intensified the rush to public debt, which tends to perform well in times of increased uncertainty. . The figures show that the business and working conditions of the service industry weakened in June compared to the previous month, with the ISM commenting that it was difficult to find qualified candidates to fill vacancies.
“The ISM reading just added more motivation to expand the Treasury yield movement,” said Ian Lyngen, an interest rate strategist at BMO Capital Markets. “A big part of what we’re seeing is a capitulation to the higher rate thesis.”
Market measures for future inflation forecast in the country also fell on Tuesday, with the so-called 10-year equilibrium rate falling to 2.33%. Yields on other long-term treasuries, including 20- and 30-year bonds, also declined as traders moved into debt. The fall pushed the performance gap between policy-sensitive two-year and ten-year notes to the lowest level since February.
The moves returned to the $ 50 billion stock market, where shares of large industrial goods companies, oil majors and large banks fell in value. All three sectors had been bolstered this year by expectations of faster growth, and large banks were also on the rise, as investors bet that higher rates would help increase profits. The S&P 500 stock benchmark fell 0.7%, before moderating later in the afternoon to close 0.2% lower during the day.
“As the equity market collapsed, the Treasury market got a bid,” said Andrew Brenner, head of international fixed income at National Alliance Securities.
Investors became large technology groups like Apple and Oracle, companies that have thrived during the pandemic and are considered less sensitive to economic fluctuations. The move helped contain the losses of the Nasdaq Composite, which finished 0.2% higher during the day.
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